Guaranteed renewability is a prominent feature
in health and life insurance markets in a number of
countries. It is generally thought to be a way for
individuals to insure themselves against
reclassification risk. We investigate how the
presence of unpredictable fluctuations in demand for
life insurance over an individual’s life-time (1)
affects the pricing and structure of such contracts
and (2) can compromise the effectiveness of guaranteed
renewability to achieve the goal of insuring against
reclassification risk. We find that spot markets for
insurance deliver ex post efficient allocations but
are not ex ante efficient. Introduction of guaranteed
renewable insurance contracts destroys ex post
efficiency, but nevertheless improves overall welfare
from an ex ante perspective.
Michael Hoy has been a member of the
Department of Economics and Finance at the
University of Guelph since 1985. He received his B.Math from the University of Waterloo
in 1975, an M.A. (Economics) from the University of Guelph in 1975, and a Ph.D. from the London
School of Economics in 1982. His research
topics include:
- Effect of genetic testing on life and health insurance markets.
- Valuation of genetic information for improved healthcare strategies.
- Measurement of inequality, poverty, and discrimination.
- Understanding the role of gender and peer effects in university participation.
This event is organized jointly by the MS2Discovery Institute and the Laurier
Department of Economics at the Lazaridis School of
Business & Economics.
Contact at the MS2Discovery Research Institute: Maria Gallego (Host of the speaker, Tecton 8: Econometrics and Quantitative Approaches to Economics, Business and Political Science
Contact at the MS2Discovery Research Institute: Maria Gallego (Host of the speaker, Tecton 8: Econometrics and Quantitative Approaches to Economics, Business and Political Science
Refreshments will be provided
